At the conclusion of their respective comment periods, both the Financial Standards Accounting Board and the International Accounting Standards Board will engage in additional discussions and deliberations before releasing final new credit loss accounting standards, said Robert Stewart, vice president of communications for the Financial Accounting Foundation.

The foundation is the parent organization for FASB. Stewart also said the FASB will review and consider all comment letters on the subject, which includes several from credit unions, industry trade organizations and vendors.

While the comment letters support some of the proposed changes, the credit union commenters were united in opposition to the FASB’s proposal to require allowances for loan and lease losses to be based upon a single expected loss model that includes all estimated losses for the life of each loan, and would require losses to be recognized before they are actually incurred.

The proposal differs from current accounting standards that base ALLL on historical loss data and requires a loss to be incurred before it is recognized.

Stewart said both the FASB and the IASB will attempt to converge their differing proposals before issuing final standards. The IASB proposal differs from FASB’s in that the IASB model would record just 12 months’ worth of expected credit losses until significant credit deterioration has occurred, at which point the full loss estimate would be recognized.

Credit unions contributed a sizeable percentage of comment letters, but represent a much smaller percentage of entities that would be affected by the rule. Stewart said the standard setting body considers credit unions to be “important constituents,” but the FASB must also take into consideration feedback from others affected by the standard, as well as input from regulators.

Both NAFCU and CUNA oppose the exposure draft. In her letter, NAFCU Regulatory Affairs Counsel Angela Meyster pointed out to FASB that unlike for-profit entities, the primary reader of credit unions’ financial statements is the NCUA, not individual or institutional investors.

“As such, standards geared toward publicly held entities are often inapplicable or extremely difficult and costly to apply to credit unions,” Meyster said. She added that for credit unions, the cost to conform to the standard would far outweigh any benefit.

CUNA President/CEO Bill Cheney called the proposal "the most critical regulatory concern credit unions have faced in quite some time, including rules or proposals that have been issued under the Dodd-Frank Wall Street Reform and Consumer Protection Act.”

Industry experts have estimated that if implemented as currently proposed, the accounting standard could double or triple the amount credit unions currently allocate for loan losses. For some, the change could have a dramatic impact on income and net worth.